Dont believe the hype, Contractor Mortgage lending is on the increase

June 6th, 2013

The Bank of England's monetary policy committee has again decided to leave the base rate unchanged, in Mervyn King's last meeting as Governor. The UK now awaits the arrival of the new Governor Mark Carney, who is due to take up his post next month. Early figures indicate that the second quarter of the year has maintained the positive signs of sluggish economic growth seen in the first quarter of 2013, making Mr Carney's job a little less daunting.

The Bank of England also released some newsworthy numbers regarding lending in April. Mortgage lending increased by £0.9 billion on the previous month, while mortgage approvals for house purchases and remortgages also increased above previous three-month averages.

Optimistic news for contractors you would have thought? Not according to one of our most popular financial broadsheets. A report in the Financial Times on 1st June painted a grim picture for contractors looking for mortgage funding. The article announced “Self-employed and contract workers struggle to secure mortgages”, and went on to comment that contractors in the UK have struggled to obtain mortgages since the start of the credit crisis 6 years ago.

Whilst there is undoubtedly some truth in this for contractors who approach their own banks and non-specialist mortgage brokers, the article coincides with one of the most exciting developments for contractors seeking a mortgage for many years.

Halifax, the largest mortgage lender in the UK, announced in May that they were opening up their contractor mortgages for all occupations. This meant all professional contractors could benefit from competitive mortgages via flexible income assessment that was previously only available to IT professionals. So what is the basis of the Financial Times commentary you may ask?

The conclusion by the FT does have some basis in fact, but the analysis is superficial at best, and only confirms what many contractors already know about approaching banks directly. When a contractor is pigeon-holed as 'self-employed' by a lender, there is indeed a greater scrutiny on income trends over a longer period of years, compared with permanent employees being assessed via payslips over 3 months.

However, a contractor specialist mortgage broker can get around the 'pigeon-holing' problem by ensuring that contractors are assessed in a manner consistent with how they work. Taj Kang, Operations Director at Contractor Mortgages Made Easy, makes the following observation about contractor mortgage funding making broadsheet news.

“It is interesting to see the recent impact of the Halifax criteria change in increasing awareness in the non-contractor community about problems that have faced freelancers looking to obtain a mortgage. These problems were around well before the financial crisis, with non-specialist brokers, and even bank advisers, forcing contractors down the more expensive self-certified route.”

“As a contractor-specific mortgage broker, we have always sought to prove income for our clients in a manner that satisfies lenders without ignoring a large portion of a contractor's earnings. The gross contract value is the most logical way to assess income, and it is great to see the banks moving towards this as the norm when assessing a contractor's borrowing ability.”

“Whilst the FT does a handy job in highlighting the plight of contractors, it is important to note that it is not all doom and gloom, the story is about 5 years too late! Competitive mortgages for contractors are available, as long as the banks are approached in the correct way.”

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CMME is a trading name of CMME Mortgages and Protection Limited. Authorised and regulated by the Financial Conduct Authority (FCA reg. 414798). Registered in England No. 04886692. Registered Office: Albany House, 5 Omega Park, Alton, Hampshire, GU34 2QE. Please be aware that Commercial Mortgages, Overseas Mortgages and some Buy To Let Mortgages are not regulated by the Financial Conduct Authority. Calls may be recorded for training and security purposes and to improve the quality of our services.